Is your business missing out on essential accounting resources that could help it grow? Money—it’s how you measure success in business. It’s also how you pay the bills, pay your employees, and keep your business running. Unfortunately, many small business owners are selling themselves short by operating without essential accounting resources, according to a survey by Clutch.
I’ve written recently about the importance of cash flow management for a small business and how your balance sheet can help you measure your company’s progress towards its goals. Just as much as your cash flow statement, a knowledgeable accountant is another essential tool to guide your business as it grows.
But Clutch’s survey found too many small business owners are trying to get by without this valuable guidance. Here’s a closer look at what the survey found.
Accountant, bookkeeper, or neither?
Nearly half of small businesses (45%) in the survey do not employ either an accountant or a bookkeeper. One-fourth have only an accountant, 11% have a combination accountant/bookkeeper, and 4% have only a bookkeeper.
Both accountants and bookkeepers perform important—but different—functions for a small business:
1. A bookkeeper maintains records of the business’s day-to-day financial transactions, such as recording income and expenses. Bookkeepers can also handle your company’s payroll and invoicing.
2. An accountant can prepare your business’s tax returns, and also provides a big picture perspective on the business’s finances. He or she can prepare and review your company’s financial statements, produce reports, and advise you on important financial decisions affecting your business.
Risky business
Many small business owners engage in some really risky business when it comes to accounting: Almost three-fourths (72%) rely on the same person in their company to handle both bookkeeping/accounting and human resources.
For a small business with only a few employees, this option might seem to make sense. However, both accounting and HR are specialized fields. Both require staying up-to-date with the latest regulations and laws; both are complex areas where mistakes can lead to penalties and fines or even lawsuits.
Do you really want to put such important functions in the hands of one person?
Instead of enlisting your bookkeeper to handle HR—or putting your office manager in charge of accounting—consider hiring an outsourced accountant. By using an accountant as needed, you can get the benefits of his or her expertise without the expense of a full-time employee. No wonder 22% of companies that use accounting services rely on an outsourced accountant.
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Software skills
Speaking of bookkeeping, how do you manage your books? The good news: More than half of small businesses (53%) use accounting software. QuickBooks is the most popular software, used by almost three-quarters of small businesses (74%).
Some 41% of small businesses use cloud-based software. However, one-third (33%) use software that doesn’t require a connection to the internet (i.e., computer-based)—a method that has some downsides.
- If you and your accountant or bookkeeper are working from different computers, it can get confusing to know which version of your books is the most current.
- You don’t have access to your books from home or when you travel, unless you bring the file home every night on a thumb drive or email it to yourself.
- There’s more room for error when you have multiple copies of a file around.
Now for the real shocker: One-fourth of businesses in the survey still use paper-based accounting. Talk about taking a risk! When you manage your books on paper:
- Your records can be lost, stolen, or damaged.
- With only one set of records, it’s difficult to share with your bookkeeper, accountant, or banker.
- There’s more room for error in your data entry or calculations, compared to software that makes calculations for you and highlights mistakes.
There’s really no reason not to take your bookkeeping online—not when today’s cloud-based accounting software makes it so simple to learn. Instead of spending time on double data-entry, reconciling accounts or just trying to figure out which version of a spreadsheet is current, you can devote that time to building your business.
RELATED: How to Make Your Accountant Love You—And Get Bigger Tax Returns to Boot